Wall Street Slips Ahead of PCE Report: What to Expect from the Fed's Inflation Gauge

As Wall Street prepares for the release of crucial inflation data later today, stock futures are edging lower, signaling a wait-and-see approach from investors. The upcoming report on the Personal Consumption Expenditures (PCE) Price Index, which serves as the Federal Reserve's preferred gauge of underlying inflation, has the potential to influence future monetary policy decisions. With inflation data still running high, questions remain about whether the Fed will ease interest rates further in December.

The PCE Report: A Key Indicator for the Fed's Future Moves

The much-anticipated PCE report, set for release on Wednesday, will offer a snapshot of inflation trends, and it is expected to show a slight uptick in prices. Economists are forecasting the annual PCE index will rise to 2.3% in October, a modest increase from the 2.1% recorded in September. This data will play a critical role in shaping expectations around the Federal Reserve's actions at its next meeting in mid-December.

While the U.S. economy has shown resilience, inflation has remained persistently above the Fed’s target. The central bank’s minutes from its November meeting, released just yesterday, indicated that policymakers still favor a gradual approach to monetary policy easing, despite inflation showing signs of stubbornness. For investors, this report could provide the final clues needed to assess whether another 25-basis point rate cut is on the horizon.

Market Moves: Futures Dip as Investors Wait

Ahead of the release of the PCE data, U.S. stock futures are trading slightly lower, with the Dow down by 37 points (0.08%), the S&P 500 falling by 10.25 points (0.17%), and Nasdaq 100 futures dropping by 69.75 points (0.33%) at 5:11 AM EST. This cautious trading reflects the market’s uncertainty as it awaits the inflation report. On Tuesday, major benchmarks closed higher, with the S&P 500 and Dow posting new intraday and closing highs. However, the Thanksgiving holiday break, which will see markets closed on Thursday and an early close on Friday, is likely to keep trading volumes subdued today.

The primary focus for today is the PCE inflation data, as investors seek clarity on the Fed's path forward. This data will also complement other key reports in the coming weeks, including updates on consumer and producer prices for November.

In the meantime, quarterly earnings results continue to roll in, with tech giant Dell Technologies (NYSE: DELL) experiencing a sharp decline in premarket trading after issuing disappointing guidance for the current quarter.

Political Risks and Tariff Concerns for the S&P 500

In broader market news, geopolitical risks are starting to resurface, particularly in relation to former President Donald Trump’s threats to reintroduce tariffs on imports from China, Canada, and Mexico. Though Trump's return to the White House is not yet a certainty, his potential policies have raised concerns among analysts. Citi's research suggests that such tariffs could significantly dent corporate earnings, particularly in 2025. These measures are expected to strain profit margins for companies, particularly within the S&P 500, which could see earnings estimates reduced by several percentage points. As uncertainty about Trump's second term looms, analysts caution that markets have yet to fully price in the risks associated with this shift in policy.

Apple Faces Challenges in China

On the tech front, Apple Inc. (NASDAQ: AAPL) is facing increased pressure in one of its most important markets: China. The company’s CEO, Tim Cook, recently appeared at the China International Supply Chain Expo, in an effort to strengthen relations with the country. China has long been a critical market for Apple, both as a major revenue source and as a hub for its manufacturing operations.

However, Apple is struggling with a sharp decline in iPhone sales in China, as local competitors, particularly Huawei, gain market share. Sales of foreign-branded smartphones, including the iPhone, fell by 44.25% year-on-year in October, according to a government-affiliated research firm. While Apple hopes the upcoming release of iOS 18.2 in December will help boost iPhone sales, analysts remain cautious about the company's ability to turn the tide in its most challenging market.

Oil Prices Inch Higher Despite Ceasefire Deal

In the commodity markets, crude oil prices have edged higher, despite the announcement of a ceasefire between Israel and Hezbollah. Traders are keeping a close eye on the potential implications of the deal on oil supplies from the Middle East, a region that has seen volatility in recent months due to ongoing conflicts. U.S. crude futures (WTI) were up by 0.39% at $69.04 per barrel, while Brent crude futures fell slightly by 0.3% to $72.54 per barrel.

The boost in oil prices is also being driven by an unexpected, substantial drawdown in U.S. oil inventories. Data released by the American Petroleum Institute on Tuesday showed that U.S. oil stocks had decreased by nearly 6 million barrels in the week to November 22, which was much larger than anticipated. If this trend is confirmed by official data later today, it could suggest that U.S. fuel demand remains robust, which would tighten oil supplies and support higher prices in the months ahead.

The attention of energy markets will now shift to next week’s meeting of OPEC+ members, where discussions on future production plans could further influence oil prices.